WSJ: LVMH Wipes Céline Slate Clean, Opening Way for 'Phoebe Effect'

WALL STREET JOURNAL | RACHEL DODES & CHRISTINA PASSARIELLO

PARIS—French fashion house Céline is quickly shedding its reputation as one of LVMH Moët Hennessy Louis Vuitton SA's most troubled brands.

After struggling for years to forge an identity and a following, the label is finding influential retailers including Barneys New York, Saks Fifth Avenue and Bergdorf Goodman are clamoring to carry its collection, even as they cut back their portfolios to focus on best sellers.

Credit for the resurgence of the brand—which LVMH bought in 1996 for €412 million ($562 million at current rates)—goes to British designer Phoebe Philo and a decision to make a sharp break with the past.

Céline recruited Ms. Philo 18 months ago. To start fresh, the company destroyed all of the inventory left in the stores prior to her first collection, a move that contributed to the €98 million in restructuring charges LVMH took last year.

Céline also closed all but one store in the U.S., cut ties to less exclusive retailers, stopped producing bags in China and restored the accent to its name, all part of a move to tightly control and elevate the brand.

Prices are up under Ms. Philo, and less exclusive retailers like Bloomingdale's and e-commerce site Net-a-Porter are out. Céline's plan is to cement a high-end image before ultimately broadening out to include more affordable offerings.

"I felt it was necessary to establish quality to the brand," Ms. Philo said in an interview. "Now that we are establishing that and the top of the pyramid is in place, we can open it out."

Her designs "did not fail to inspire us, which is hard to do—particularly in this environment, where nobody was looking to add anything," said Ron Frasch, president of Saks Inc., which has picked up the line for its Boston and suburban Philadelphia stores.

Ms. Philo's minimalist reinterpretation of the label has struck a chord with retailers, and it was on display Sunday, when the 36-year-old showed her second runway collection for Céline during Paris Fashion Week.

LVMH pursued Ms. Philo intensely. She had spent five years as head designer of French label Chloé, where she created the hit Paddington bag and more than doubled the brand's sales, before taking off two years off to focus on her family.

Pierre-Yves Roussel, chief executive of LVMH's fashion division, traveled to London every other week for nearly a year to persuade Ms. Philo to sign on. The company agreed to build her a design studio in London, where she lives.

LVMH, which also owns Moët & Chandon champagne, Dior perfume and Tag Heuer watches, doesn't disclose sales by individual fashion house. It hasn't set a timetable for the label to make a profit, according to people close to the company. The line is still a tiny part of LVMH, which is dominated by Louis Vuitton.

It's apparent, though, that while retailers have been calling many of the shots with fashion houses, Céline is setting its own rules. The brand managed to get Bergdorf and Barneys to share the rights to Ms. Philo's debut Spring 2010 collection in the New York market, even though department stores normally get exclusives on new brands. Barneys put a $1,050 cotton taffeta top with matching $1,200 canvas pants by Céline on the cover of its new spring catalog—a coup for the niche French brand.

Times weren't always this good. Founded in 1945 as a purveyor of children's shoes that later expanded into women's clothing, Céline had floundered since a brief moment of profitability under the auspices of the American designer Michael Kors, who left in 2004.

The look of the brand "seemed to waffle after he left," says Robert Burke, a luxury goods consultant. "It felt a bit Prada-esque one moment, a little something else the next."

Mr. Kors declined to comment.

Once on board, Ms. Philo and Céline's new chief executive, Marco Gobbetti, who previously revived LVMH's Givenchy house, decided to whittle down the brand's distribution. They closed some 20 out of more than 100 stores around the world, including the flagship in New York, situated inconveniently across from Barneys.

"I really felt that in coming back into the workplace, and in life generally, if you start small and reduce everything to a point that's understandable, it gives you a foundation to grow," Ms. Philo said. "It's all about Céline being brought back to a focused situation."

Ms. Philo unveiled her first interpretation of Céline last June, with a pared down aesthetic. The current "utility chic" look, featuring "clean, interesting, almost military tailoring," is a direct consequence of Ms. Philo's first runway show in October, said Bergdorf Goodman fashion director Linda Fargo. She has linked the constellation of spring trends including wider-leg trousers, leather-as-clothing, and the palette of olive, camel and nude back to Céline, calling it "the Phoebe Effect."